State by State – Vietnam and Colorado Trade
International trade is a significant factor in the economy of Colorado, where 43,615 jobs were supported by goods exports in 2014. This importance is amplified by the need of the state to plug its trade deficit, which stood at US$5.9 billion in 2014.
According to the US Census Bureau, in 2014, Colorado exported US$8.37 billion in goods and services to foreign markets. Out of a total US$8.34 billion in export value in 2014, Colorado’s largest foreign markets in 2014 were Canada (US$1.64 billion), Mexico (US$1.07 billion), China (US$655 million), Japan (US$509 million) and the Netherlands (US$341 million).
The state’s top five goods exports in 2014 were food manufactures, computer and electronic products, machinery, chemicals, and other manufactured commodities. In 2014, Colorado exported over US$2 billion in computer and electronics, US$1.6 billion in food products and US$1.0 billion in machinery manufactures.
US$3.5 billion of this went to territories which were a party to a free trade agreement (FTA) with the United States.
On October 5, 2015, the Trans-Pacific Partnership (TPP) FTA was agreed in principle, bringing closer together TPP member economies Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam. It is difficult to overstate the impact liberalization of tariff regimes in TPP markets will have on U.S. exporters. TPP markets received US$727 billion of U.S. exports in 2014, 45 percent of the country’s exports in that year. The US Department of Commerce estimates that in 2013, exports to TPP markets supported 3.0 million U.S. jobs.
Currently, tariffs on Colorado’s machinery products are up to 70 percent in TPP members Brunei, Japan, Malaysia, New Zealand, and Vietnam. Health products face rates of up to 30 percent, and hi-tech instruments 25 percent.
Colorado’s export value had shrunk 2.4 percent from 2013 to 2014. As the TPP is expected to reduce or eliminate 18,000 tariffs on U.S. exports to member markets, we expect this trend to reverse when the agreement comes into effect.
Vietnam in the TPP
Vietnam is not the biggest market in the TPP, but its economic dynamism, projected by HSBC to sustain at least five percent GDP growth until at least 2030, and burgeoning middle class, represent opportunities for Colorado companies. This isn’t yet reflected in the outlook of enough Colorado businesses. In 2014, Colorado only exported US$15.2 million in goods value to Vietnam, a US$9.7 million drop from 2013, and far below the US$49.4 million peak in 2012. Food manufactures have dropped the most from this peak, and the state would benefit from a reduction in Vietnam’s tariffs on frozen chicken cutlet imports, which stood at 20 percent in 2012.
For businesses importing from Vietnam, the agreement likewise presents an opportunity. In 2013, man-made fiber sweaters and overcoats from Vietnam faced tariff rates of 32 percent and 28 percent respectively. Imports from Vietnam in 2014 stood at US$171 million in value, and this figure is sure to rise upon TPP implementation.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Colorado-based companies that are looking to further develop their operations in Vietnam. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at: email@example.com
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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